Most individuals have no real idea as to how to improve their credit score. To see exactly what comprises your credit bureau report review my article called, "Understanding Your Credit." After you have digested that information and after you have reviewed all of the information presented below, you will be somewhat prepared to begin the task of improving your credit score. Check Your Credit Report
The first step to improving your personal credit is to review all of your credit bureau reports which are provided by Equifax, Experian and TransUnion. After printing your credit reports it would be a good idea to make copies to work with. Make sure that you thoroughly review each credit report for inaccuracies.
Correct Errors Found on Your Credit Report
A credit bureau may not always have accurate or up-to-date information. If you should find any errors or mistakes on your credit bureaus reports, you should immediately write to both the creditor and the credit bureau. Send each letter by certified mail with a return receipt requested so you can later prove that these companies actually received your correspondence.
When writing to a credit bureau, send a full written explanation along with copies of any supporting receipts, cancelled checks (fronts and backs), and/or documents. Request the credit bureau to provide a brief explanation of your request to all lenders that may request your credit bureau report until this matter is completely resolved.
When writing to a creditor, make sure that you describe the problem clearly and that you include copies of any documentation that you may have to support your claim, such as paid receipts or cancelled checks (fronts and backs).
All credit bureaus and creditors are legally bound to investigate all credit disputes and report back to you in writing within a reasonable period of time. Federal law requires credit bureaus to respond to customer disputes within 30 days. If they do not respond within this time frame or they do not provide evidence of their claim, the credit bureaus are required to remove the disputed information from your credit bureau report.
The Fair Credit Reporting Act (FCRA) and the Fair Debts Collection Practices Act (FDCPA) have been established to protect consumers. The FCRA requires that all of the information on your credit bureau report must be accurate, timely and verifiable in order for it to remain on your report. Otherwise, it must be removed.
Close All Unnecessary Credit Accounts
If you happen to have an excessive number of open credit accounts, consider closing some of the accounts that you are not currently using. However, don't close all of your accounts since you will need to maintain a good credit history. Closing unnecessary accounts will also remove some of the temptation to overspend.
Track All of Your Current Spending
Do you know where your money goes? If not, you should. Many people spend a great deal of their income on little extras every month without being aware of just how much they are spending. Try tracking where all of your money goes for at least one month. You will then have an idea what you are actually spending your money on. Next, determine how much of that amount is for necessary expenses and what part was really not needed. Next, set up a monthly budget. This will help you set aside needed cash for all of your financial obligations. Make sure that you pro-rate and include expenses that are not paid on a monthly basis (due quarterly, semi-annually, and annually), such as auto insurance, taxes and maintenance expenses.
Set a New Maximum Spending Limit for Yourself
Only after determining exactly where your money has been going, can you actually take charge of your finances and establish where you want to spend your money in the future. This can best be accomplished by making a list of your financial goals and then sticking to it. Then you will need to make sure that your plan is realistic and that you continue to keep tracking where your money is actually going each month. A weekly review of your current spending would be a great start in the right direction.
Pay All of Your Bills on Time
To accomplish this, you will need to set up a simple system to remind yourself when your bills are due. This needs to be put in writing for the entire month and can be as simple as listing your bills on a calendar. If you use this method, do not use your calendar to write down anything else. When reviewing your spending each week, also review your calendar. Make sure that you always pay your bills and set money aside for non-monthly expenses before spending money on those little extras.
If an emergency arises and you don't think that you will be able to pay some of your bills, contact your creditors before the payments are actually due. Tell them about your problem and ask if they could help you by reducing or deferring your payments.
Consider Using Your Home's Equity for Debt Consolidation
If you have owned your home for awhile, you might have equity built up that you could use to pay off some, or all of your outstanding debt. High-interest credit card debt can become very costly. Debt consolidation can be accomplished with one of several different types of loans, such as refinancing your mortgage, a second mortgage loan, and securing a home equity loan or a home equity line of credit. If you have enough equity in your home, you can also secure additional cash for any worthwhile purpose.
Consider Using a Qualified and Reputable Credit Counselor
If you should ever feel that your spending has gotten totally out of control or that you can no longer budget your own monthly expenses, it may be time to find a qualified and reputable credit counselor to help you. Don't just call the first one that you find in the yellow pages or come across on the internet. This is a critical point in your life and you will need to do a little research before making a final decision. If you know anyone who has used a credit counselor before, ask them if they would recommend this company.
Many individuals have used these types of services and it has actually cost them considerably more in the long run by doing so. It's a possibility that you'll be able to do more than a credit counselor can do by simply calling all of your creditors, explaining your current circumstances, and requesting new payment arrangements.
Try to avoid companies that promise to fix your credit for a fee. Many of these fees are quite high and many of the services are not exactly what you would expect. Some of these companies may suggest that you declare bankruptcy to eliminate your debts. In some instances, that could be bad advise. Bankruptcy should be avoided at all costs because it is included in credit bureau reports for up to 10 years and can severely affect your ability to secure a home loan and to obtain other forms of credit.
